CEOs Back Debt Concepts Broad Enough to Please Both Sides
October 26, 2012
Deficit-reduction principles backed by more than 80 U.S. chief executive officers are so broad that anti-tax advocate Grover Norquist and an ally of President Barack Obama both claim their plans could satisfy the standards.
The Campaign to Fix the Debt, with more than $30 million in backing, announced an expanded list of supporters yesterday, including the leaders of Verizon Communications Inc. (VZ), Cisco Systems Inc. (CSCO) and Microsoft Corp. (MSFT) On the most vexing issue -- whether tax increases should be part of a deal -- the principles refer to lower tax rates and higher revenue, not higher taxes.
Grover Norquist, president of Americans for Tax Reform, speaks during an interview in New York, on March 12, 2012. Photographer: Peter Foley/Bloomberg
“What they’ve called for is perfectly fine,” said Norquist, president of Americans for Tax Reform, who supports a no-tax-increase budget proposed by the Republican vice presidential nominee, Representative Paul Ryan of Wisconsin. “The president’s plan doesn’t fit. Ryan’s plan does.”
To Michael Linden, director of tax and budget policy at the Center for American Progress, the CEOs’ portrayal of a proposal by 2010 fiscal commission leaders Erskine Bowles and Alan Simpson as an “effective framework” is a clear sign they’re calling for higher taxes, just as his group and Obama have.
“They are endorsing the president’s approach to deficit reduction even as they have supported Republicans” politically, said Linden, whose Washington group supports what its website calls “progressive ideas” and is aligned with Democrats. “At some point, and I hope that point is coming soon, and if they are serious about fixing the debt, as the organization’s name suggests, then they need to reconcile that contradiction.”
The executives’ stance injects them into the fiscal divide in Washington less than two weeks before the Nov. 6 election. Afterward, Congress plans to return to Washington to seek a deal that avoids the fiscal cliff -- a combination of automatic tax increases and spending cuts scheduled to take effect in January.
In that time, the CEOs want Congress to come up with a framework for a long-range deficit reduction agreement with details to be worked out in early 2013.
The CEOs’ principles call for Congress to overhaul Medicare and Medicaid, “strengthen” Social Security and enact “comprehensive and pro-growth tax reform” that lowers rates, broadens the tax base, raises revenue and cuts the deficit.
Obama has repeatedly called for a “balanced” approach to deficit reduction that would include spending cuts and tax increases. Republicans insist on no tax increases in a deficit plan.
The deficit-reduction campaign group’s founders -- Bowles, a Democrat and former White House chief of staff for President Bill Clinton, and Simpson, a Republican and former senator from Wyoming -- proposed tax increases and spending cuts in 2010.
Still, asked specifically whether the campaign supports tax increases, Jon Romano, a spokesman for the group, referred to its stated principles and said it wasn’t endorsing any particular proposal.
The campaign “is looking for a plan that includes a comprehensive and pro-growth tax reform, which will broaden the base, lower rates, raises revenue and reduces the deficit,” Romano said.
Linden said that if the CEOs “are out there endorsing the Bowles-Simpson framework of revenue and spending, then they are actually calling for more revenue than the president has.”
“They are so much closer to where the president is than where the congressional Republicans are or where a potential” President Mitt Romney would be, he said.
Norquist, who encourages lawmakers to sign a pledge not to raise taxes, said the campaign’s call for lower tax rates is incompatible with Obama’s plans and that higher revenue could come from economic growth.
“It’s a big endorsement of Ryan while pretending to be neutral,” Norquist said. “I’ll take it.”
Some of the CEOs supporting the group have said they would accept higher taxes on top earners such as themselves, including Lloyd Blankfein of Goldman Sachs Group Inc. (GS) and David Cote of Honeywell International Inc. (HON)
Several of the CEOs support Republicans with some of their political donations, including John Chambers of Cisco, Randall Stephenson of AT&T Inc. (T) and Douglas Oberhelman of Caterpillar Inc. (CAT)
Chambers gave $50,000 during this election cycle to a pro- Romney political action committee plus another $7,500 divided between two House Republican leaders. Stephenson gave the maximum $5,000 contribution to Romney and to House Speaker John Boehner of Ohio. Oberhelman gave $5,000 to Romney.
Chamber of Commerce
AT&T and Caterpillar have executives on the board of directors of the U.S. Chamber of Commerce, which opposes any debt-reduction agreement that includes tax increases.
“We recognize the need for additional government revenue,” Bruce Josten, the chamber’s chief lobbyist, said in an e-mailed statement yesterday. “However, raising taxes on successful small businesses and individuals, investments and capital gains would discourage capital accumulation and job creation.”
“We can generate more revenue by fundamentally reforming our tax code, implementing policies like regulatory reform that will spur growth and jobs, and dramatically expanding American energy production,” Josten said.
Jim Dugan, a spokesman for Caterpillar; Michael Balmoris, a spokesman for AT&T; and John Earnhardt, a spokesman for Cisco, didn’t respond to requests for comment on their CEOs’ political donations yesterday.
Jim McCrery, a member of the campaign’s steering committee who also lobbies for a group of companies that want to keep current capital-gains tax rates, said in an interview earlier this month that he didn’t think the principles are “contradictory to Republican goals.”
At the same time, any plan that relies on new revenue would probably be subject to congressional rules that don’t allow tax- cut plans to assume they can be partially financed by economic growth, said McCrery, a former Republican congressman from Louisiana.
“Any time in our government when you try to get both major political parties in agreement on a long-term fiscal plan, it’s going to be difficult, there’s no denying that,” said McCrery, a former top Republican on the House Ways and Means Committee. Still, he said lawmakers “are very concerned about the future of this country, and they know we cannot sustain the current fiscal path that we’re on.”
The CEO principles are a signal that businesses will support raising tax revenue by limiting tax breaks while avoiding rate increases, said Rich Gold, a Democratic lobbyist and partner at the law firm Holland & Knight LLP in Washington.
“I think it’s helpful for the business community to come to the table on this issue,” he said. “We’ve got a deep hole here and you can’t even make the argument with a straight face that we can cut spending and get there.”